Westpac could follow the lead made by ANZ Bank of independence from the Reserve Bank of Australia's (RBA) overnight cash rate cuts insofar as setting of interest rates is concerned.

The Australian cited the bank's rapid expansion in mortgages during the global financial crisis as the reason why Westpac, Australia's second-largest bank by market capitalization, would want to be independent from the RBA rate-setting policy.

"Westpac to us is the natural price leader despite having a relatively cheap flagship standard variable rate, with funding cost pressures that will increase the need for an industry repricing, in our view," The Australian quoted Credit Suisse analyst Jarrod Martin.

When the RBA cut the overnight cash rate in late 2011, the four largest banks in Australia were pressured to pass in full the 25 basis points cuts made by the Australian central bank. However, ANZ said that it would be the last time the bank would follow RBA rate cuts as the lender's basis for future rate policies. ANZ set the second Fridays of every month as the time it would announce interest rate decisions.

With the release on Wednesday by the Australian Bureau of Statistics (ABS) inflation report, economists are in agreement that another round of rate cuts would be made by the RBA when its monetary committee meets on Feb 7.

The ABS reported a 3.1 per cent consumer price index, the lowest in four quarters. Economists agreed that the low inflation rate would warrant another round of rate cuts by the RBA.

"In the light of continuing global uncertainty and some fragility in the non-mining sector of our economy, there should be no question as to a rate cut in February," The Australian Broker News quoted HIA senior economist Andrew Harvey.

Brian Redican, senior economist at Macquarie, added that inflation is not a barrier to further key lending rate cuts by the RBA.

"You've got a high Australian dollar, slower global growth and soft retail sales, there's more than enough reason to ease. We see another 50 basis points of cut," Business Live quoted Mr Redican.

Su-Lin Ong, senior economist of RBC Capital Markets, added that with core inflation during the second half of 2011 averaging 0.5 per cent and given the weakness in the non-resource economy and the global risk, the inflation data would still be consistent with lower rates and another key lending rate cut in February. She forecast that the overnight cash rate would be down to 3.5 per cent by end of 2012.

CommSec economist Savanth Sebastian said it is almost a done deal that the RBA will cut rates anew.

"The Australian economy has been quite sluggish, global growth forecasts have been cut and I think the Reserve Bank will take out a little bit more insurance in these volatile times," the CommSec economist pointed out.

Mr Redican said that the strong Australian currency which places more pressure on areas such as manufacturing would be the rationale for the RBA to help support the domestic economy through another overnight cash rate reduction.

Even Treasurer Wayne Swan agreed that another RBA rate cut is likely based on more evidence of Australia's strong economic fundamentals.

"With underlying inflation sitting squarely in the RBA's target band, it does create room for further interest rate cuts into the future," AFP quoted Mr Swan.

Mr Harvey called on the big four to pass in full any new interest rate cut that the RBA may make.

"The RBA can apply more pressure on the banks and ensure borrowers are not left in the lurch by making a bigger than expected cut in the cash rate of at least 50bps," Mr Harvey said.

While a Westpac spokesman declined to comment or speculate on interest rate movements ahead of any RBA decision, one good news for Australian borrowers is the possible entry of three large Japanese banks into the home loan market.

The Mistsubishi UFJ Financial Group, Sumitomo Mitsui Financial Group and Mizuho Financial Group are planning to capture 5 to 10 per cent of the Australian home loan market by offering lower interest rates for home loans.

The planned entry of the three Japanese banks in Australia was welcomed by a member of the Financial Sector Advisory Council amid the veering away by the big four from RBA's policy rate decisions.

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